M1: 2Q15 results came in as expected
- 2Q net profit 0.7% above forecast.
- Eyes moderate earnings growth.
- Decent 5.7% yield for FY15.
2Q15 results within expectations
- M1 reported its 2Q15 results last evening, where revenue jumped 15.5% YoY (-6.1% QoQ) to S$276.8m, or about 0.7% above our forecast.
- Handset sales remained fairly robust at S$72.7m (versus S$90.4m in 1Q15) as demand for the new Apple iPhone 6 and 6+ likely remained strong.
- But EBITDA eased 0.4% YoY (-2.3%) to S$55.2m, while net profit rose 0.8% YoY (-3.0% QoQ) to S$44.3m, also 0.7% above our estimate.
- For 1H15, revenue rose 19.1% to S$571.7m, forming about 54% of our full-year forecast, while net profit grew 3.8% to S$90.0m, or about 50% of our FY15 estimate.
- M1 declared an interim dividend of S$0.07/share, unchanged from the year-ago period.
Keeps moderate earnings growth outlook
- As expected, M1 has kept its previous guidance of achieving “moderate” earnings growth this year, which we understand to be within the single-digit range, driven by continued growth in data usage.
- M1 highlighted that 72% of its postpaid customers are on tiered plans (versus 68% in 1Q15), while 23% of these subscribers exceeded their data bundles (versus 20% in 1Q15).
- M1 also saw a modest improvement in fiber ARPU in 2Q15 to S$46.3/month, driven by corporate customers, but competition for the home segment is likely to remain stiff.
- The telco expects to spend S$120m as capex this year, unchanged as well from its previous guidance.
Maintain BUY with unchanged S$3.66 fair value
- As the numbers were mostly in line with our forecast, we opt to leave our FY15 estimate unchanged for now.
- We also maintain our BUY rating with an unchanged S$3.66 fair value, supported by an attractive 5.7% yield.
- While the IDA appears to be keen on introducing a new mobile operator into the market, it is not a given due to the high capital outlay for rolling out its own network coverage.
- As such, the recent fall in price due to these concerns may be somewhat premature; although the spectre of rising interest rates is likely to continue to weigh on yield stocks.
(Carey Wong)
Source: http://www.ocbcresearch.com/
